This is an ultra-competitive space and I am a mom & pop newcomer. I need ways to stick out, with our brand proposition being quality.
I believe customers selling Product X fail in 2 respects. The main/ primary reason is the product should be refrigerated/shipped with cold packs. The second reason is the ingredients could be of higher quality.
Product X retails most commonly for $25. The vast majority of the space is at $15-25, and some branded products are $28-35, and the very rare brand at $50. The highest volume items are $18-25. I don't perceive any differentiation in product between the $15-$50 product aside from brand/reputation.
I think the higher quality message is worth $3/unit. Refrigeration/shipping with an ice pack is the bigger differentiator, however, and would drive more volume than the +$3/unit from higher quality. Maybe refrigeration can drive +$3-5/unit, but I know it can drive volume. So in aggregate I think I can charge +$3-8/unit. So if average Product X is $25, I can get +$28-33/per bottle.
My Problem: Refrigeration/Ice Pack = Expensive
Refrigeration + Ice Pack = +$13.50 in cost vs. using Amazon FBA
- Adding an ice pack/thermal bag/logistics cost adds ~$3 in material cost.
- Further, you will need to do FBM not FBA (FBA doesn't have refrigerated warehouses/ice pack shipping) -- so you need to pay the Amazon marketplace fee and pay the entirety of shipping out of your pocket. You want to send priority mail at $10.50 (+$7 vs. USPS first class) at your own cost.
So I Have 4 Possible Sales Strategies (I Think)
1) Sell on Amazon FBA/Walmart etc. at $28 (no refrigeration, no ice pack)
2) Sell on Amazon FBM/Walmart etc. at $41 (refrigerated product with priority mail ice pack).
3) Offer two different ASIN/SKU on each channel (let the customer decide)
4) Sell the $28 unrefrigerated version on all channels, and the refrigerated version on my website.
Why I Struggle
Reasons against charging $41:
1) I am not sure what the volume impact is from charging $41. Maybe this is what I need to cement my place on crowded marketplaces. But maybe this is just pricing myself out of business.
2) My charging $41 doesn't increase my margin dollars, it is a straight pass through of my incremental cost. I don't think consumers understand the incremental cost to do this and how my margin % will shrink.
3) If the vast majority of products are not refrigerated -- am I needlessly pricing myself out of the market?
Reasons for charging $41
1) My brand/product will very differentiated, and could drive volume
2) It keeps with my brand proposition of quality & high integrity. That is my brand!
Reasons for mixed offering
1) Customers can decide if the science warrants +$13 cost
Reasons against mixed offering
1) It sends a mixed message: why should consumers pay +$13/50% for the same product, if a vendor they trust feels comfortable offering the same product at a cheaper price without refrigeration? How can I advertise 'refrigerated is better' and yet offer an unrefrigerated version?